ORDER
1. These two appeals have been filed by the Revenue against the judgment of the Tribunal dt. 25th June, 2002 said to have been received by the Revenue on 9th July, 2002. Appeal No. 11 of 2003 was admitted vide order dt. 17th July, 2003 by formulating the following two substantial questions of law:
1. Whether on the facts and in the circumstances of the case, the Tribunal was justified in upholding the action of the CIT(A) in deleting the addition of Rs. 3,46,879 made by the AO on account of undervaluation of closing stock?
2. Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that investment in the purchase of stock in trade required for the business not recorded in the regular books, and as appearing in seized diary, pertains to asst. yr. 1988-89 and not to 1987-88?
While Appeal No. 13 of 2003 was admitted on 27th Feb., 2003 without framing any substantial question of law.
2. The matters were argued with the understanding that both the appeals involve the substantial question of law No. 2 framed in Appeal No. 11 of 2003 only, while the Appeal No. 11 of 2003 involves the other question as well.
3. The brief facts of the case are that the assessment was made by the AO, for two assessment years, being asst. yr. 1987-88 and asst. yr. 1988-89. Against these assessment orders, appeals were filed, and the learned CIT(A), partly allowed the appeals. Then the matter was carried to Tribunal by both the parties, inasmuch as, the assessee filed appeals being Appeal Nos. 2606/1994 and 2607/1994, while two appeals were filed by the Revenue being Appeal Nos. 2733/1994 and 2734/1994. All the four appeals were decided together by the learned Tribunal by the impugned judgment.
4. The learned Tribunal while deciding the question No. 1 framed in Appeal No. 11 of 2003, relating to the deletion of addition of Rs. 3,46,879, came to the conclusion relying upon the judgment of Hon’ble the Supreme Court in CIT v. British Paints India Ltd. , concurred with the conclusions of CIT(A) and maintained the deletion of the addition.
5. In our view, a reading of the judgment of Hon’ble the Supreme Court in British Paints India Ltd.’s case (supra) does show, that the findings recorded by the Tribunal, and the CIT(A) in this regard do not require any interference, and the question No. 1 framed in Appeal No. 11 of 2003 is, therefore, answered against the Revenue, and in favour of the assessee.
6. Coming to the question No. 2, some facts are required to be gone into, inasmuch as, in the present case, the investments added as undisclosed investments were found to have been made during the period 3rd Nov., 1986 to 31st March, 1987, and the learned AO, considering the turnover of the financial year 1987-88, for the purpose of arriving at the investment, and GP, came to the conclusion that a sum of Rs. 2 lacs is required to be added, as unexplained investment in the asst. yr. 1987-88, and it was accordingly added. In appeal filed against the assessment, relating to asst. yr. 1987-88, it was found, after undertaking certain calculations that the addition required to be made is only of Rs. 88,000 instead of Rs. 2 lacs; for this purpose, the learned CIT(A) took into account the turnover, the transactions in the diary, considered the GPs, and thus, arrived at the above figure. Then in the appeal filed by the assessee against the assessment order for the asst. yr. 1988-89, the CIT(A) found that since this investment has been taken into consideration in the year 1987-88, there is no need to make further addition of unexplained investment. Accordingly the addition of Rs. 2 lacs made by the AO in the assessment for the year 1988-89 was deleted.
7. Since all the appeals were decided by the Tribunal, by the common order, and since the question canvassed before us, in both the appeals is only, as to whether the addition is required to be made in the assessment for the asst. yr. 1987-88 or 1988-89, we examine this question.
8. It appears that there has been good amount of confusion before the Tribunal, inasmuch as, the addition made in the asst. yr. 1987-88 of Rs. 2 lacs, or reduced by the CIT(A) to Rs. 88,000, and the addition made by the identical amount in the year 1988-89 was deleted by the CIT(A), on account of the amount having been added in the year 1987-88, and the learned Tribunal had considered the question only while deciding Appeal Nos. 2733 and 2606, which both related to the year 1987-88, and found that the amount could be added in the year 1988-89 only, and therefore, while deciding that appeal, deleted that amount. Then what we find is, that there is no discussion by the Tribunal while deciding the appeal of the Revenue, relating to the year 1988-89 being Appeal No. 2734. Obviously in the appeal of the assessee being Appeal No. 2607, this question was not required to be agitated, as the amount had been deleted, with the result, that notwithstanding the finding recorded by the Tribunal, as recorded about the amount being not capable of being added in the year 1987-88, and capable of being added only in the year 1988-89, the amount has gone deleted. Be that as it may.
9. The fact does remain that the amount is required to be added, as the question of liability to add this amount, is not under challenge on the side of the assessee. The question, therefore, appears is, only, as to whether the amount is capable of being added in the year 1987-88 or 1988-89?
10. For examining the question, the relevant provision of law is contained in Section 69 of the IT Act, 1961, which reads as under:
Section 69. Unexplained investments.–Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the AO, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.
Thus, a look at this provision leaves no manner of doubt that where in any financial year immediately preceding the assessment year, the assessee has made investments, which were not recorded in the books of accounts, if maintained by him for any source of income, and no explanation is offered, then the value of the investment is to be deemed to be income of the assessee of such financial year. Here the confusion appears to have arisen because the relevant previous year of the assessment is on the basis of Dipawali to Dipawali, which in the present case was from 3rd Nov., 1986 to the Dipawali of 1987. It may be observed here, at the cost of repetition, that the transactions relate to the period 3rd Nov., 1986 to 31st March, 1987.
11. Since the words used in Section 69 are “deemed to be the income of the assessee of such financial year” i.e. the financial year immediately preceding the assessment year, in which the assessee has made investments, which are unrecorded; obviously, the financial year for these entries is to be taken to be from 1st April, 1986 to 31st March, 1987, and for that financial year, assessment year has to be 1987-88 and not 1988-89.
12. That being the position, the finding recorded by the Tribunal holding that the amount is not capable of being added in the financial year 1987-88 cannot be sustained, and is set aside, and the question No. 2 framed in Appeal No. 11 of 2003 is accordingly answered. Obviously, since the amount being found liable to be added in the asst. yr. 1987-88, and is being so ordered to be added, it obviously need not be added again in the asst. yr. 1988-89, with the result, that the order of the Tribunal as challenged in Appeal No. 13 of 2003, does not require any interference.
13. The net result of the aforesaid discussion is that Appeal No. 11 of 2003 is allowed in part, and the order of the CIT(A) for the asst. yr. 1987-88, reducing the addition from Rs. 2 lacs to Rs. 88,000 in the asst. yr. 1987-88 is restored, and the corresponding part of the judgment of the learned Tribunal is set aside, while the Appeal No. 13 of 2003 is dismissed.